What is CFD Trading?
CFD trading is the newer technique of financial trading which is growing in popularity. Here we will discuss what is CFD trading and what are the features of CFD trading which makes it distinguishable from other types of financial trading techniques.
What is CFD trading?
CFD refers to contract of difference. It is a mutual agreement between the parties concerned for exchanging the difference which comes for the opening and closing price of a contract. In CFD trading you don’t have to actually own the object on which you are trading, you just have to trade on the live price fluctuations in the market.
CFD’s can be used for the speculation on the future movement of the market prices and it is regardless whether they are rising or falling and still you can make money. Either you can sell (go short) to get profit from fall in prices or you hedge your portfolio to offset any type of potential loss in the value of your physical investments. CFD trading is great to gain exposure in a number of markets and there are more than 10000 markets to trade. There are shares, indices, commodities, currencies and more and you can trade on as many markets you wish. CFD’s are products that are leveraged and you can just pay a small fraction of the total value of the contract and perform trading. Your ROI can be magnified with the help of CFD trading. Before starting CFD trading it is important to understand what is CFD trading and its features. Here are some distinctive features of CFD trading
CFD trading features:-
After understanding what is CFD trading let us discuss its salient features.
- “Go long” or “go short” options- If you feel that the market prices will rise, you can go long (buy) and if you feel that the market price will fall then you can go short (sell). Therefore if you feel that market will go down, you can sell your CFDs and still you get profit with the fall in prices. Thus in CFDs you can make profits with the flexibility of the market whether it moves up or down.
- The option of hedging your portfolio- If you discover that some portion of your portfolio may experience a loss in value than you can offset those by short selling. By short selling you can achieve profit in that portion of your CFD portfolio.
- 24 hour trading– CFD trading is made available 24 hours a day and all the 7 days a week.
- Leverage– CFD trading is done on leverage and therefore you can trade even by paying a small value of the total trade value and this is known as margin. For example margin start from just 1 %.
- Wide range of market – A great feature is the ability to trade on a wide range of markets through CFDs.
To become a good CFD trader, learn what is CFD trading in detail and learn its techniques properly to make profits in the long run.